Goldman doubles down on gold, tipping stock re-rating Joanne TranMarkets reporter
Jan 15, 2025 – 3.14pm
Goldman Sachs has doubled down on its bullish outlook for gold, saying prices will keep climbing from near record levels in a welcome boost to Australia’s mining companies, which will be among the key beneficiaries.
The broker has raised its long-term gold price forecast to $US2300 an ounce from 2029, up from the previous estimate of $US1950, which reflects its expectation that prices will be “sustained at elevated levels”, according to a report led by Goldman analyst Hugo Nicolaci.
Goldman Sachs has lifted its long-term gold price forecast. Louie Douvis
Late last year Goldman’s commodities team tipped more buying from central banks, which it said would sustain the gold prices over the long term along with the “additional cyclical support from a gradual boost to exchange-traded funds”.
In particular, it noted that Chinese demand was notably strong, with the country’s central bank significantly increasing its gold reserves by adding large volumes of bullion.
While the price of the precious metal climbed to record levels in 2024, gold stocks failed to follow suit and underperformed the market. This means there is considerable upside potential for ASX-listed gold miners as they play catch-upp, according to Goldman.
The broker expected the higher commodity price to outpace rising production costs and bolster the balance sheet of gold explorers, increasing capital returns and improving prospects for M&A.
It has upgraded several ASX-listed gold producers to a “buy” rating despite also flagging inflationary pressures that continue to plague the industry including rising diesel, labour and freight costs, which it said remained a significant concern.
Large-cap gold miners Northern Star Resources and Newmont were highlighted for their strong production outlooks, with both expected to ramp up output over the next five years at average compound annual growth rates of around 4 per cent to 6 per cent.
Northern Star was upgraded to “buy” as the team forecast an uplift in production in the second half of the year and continued strong free cash flow generation.
Goldman initiated coverage of Newmont with a “buy” recommendation, citing its Tier 1 production and earnings growth, which are expected to outpace its peers.
Despite significant near-term costs, it said the miner’s growing free cash flow and discounted valuation offered an “attractive” entry point for investors,
It was also optimistic about the mid-cap gold sector, with the broker particularly bullish on Gold Road Resources because of its proposed acquisition of smaller rival De Grey Mining, which it said could “support Gold Road Resources re-rating”.
Goldman isn’t the only broker bullish about gold. US rival Citi is also forecasting the dazzling rally in precious metal prices to resume over 2025, with gold tipped to jump a further 15 per cent to $US3000 an ounce and silver surging a similar amount to $US36 an ounce.
Similar to Goldman, Citi also believes central banks and governments will keep buying the yellow metal, even if tensions in the Middle East and Russia ease.
ASX-listed gold producers are also trading higher so far this year. Newmont has advanced 8.3 per cent, Northern Star Resources rallied 12 per cent and De Grey Mining increased 13 per cent.
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